Europe shares gain as investors bet on rate cuts

LONDON, Nov 3 (Reuters) - European stocks rose early on

Monday, heading for a fifth straight day of gains as oil shares

climbed and investors cheered the prospect of likely rate cuts

in Europe this week.

At 0958 GMT the pan-European FTSEurofirst 300 index

was up 0.3 percent at 931.19 points, tracking gains in Asia

overnight and on Wall Street on Friday. But the index is down 38

percent this year, rattled by the ongoing financial crisis.

Commodities shares led the advance, in spite of a fresh dip

in the oil price. Shares in BP (nyse: BP - news - people ), Royal Dutch Shell (nyse: RDSA - news - people ) and Total added between 0.9 and 1.6 percent.

Among miners, Kazakhmys, Xstrata (other-otc: XSRAF.PK - news - people ) and Vedanta

Resources added between 7.7 and 12.4 percent as a weaker

dollar helped to lift gold prices.

The European Central Bank and the Bank of England are

expected to lower interest rates this week, following recent

rate cuts by China, India, Japan and the United States.

'Given the massive scale of the reflation efforts we now see

globally, be it in the form of rate cuts or fiscal packages, the

odds of a more durable rally have increased, albeit that the bad

news will not be over' said Gerhard Schwarz, head of global

equity strategy at UniCredit in Munich.

'It will be erratic going forward and a bit more choppy, but

nonetheless the odds have improved that the markets have found a

bottom for now.'

Major U.S. stock indexes rose by 1.3-1.6 percent on Friday,

while Europe's FTSEurofirst 300 registered a 2.8

percent gain in the previous session.

A choppy banks sector also rose. Societe Generale

gained 2.3 percent after reporting third-quarter net profit was

down 83.7 percent but saying it is financially strong enough to

withstand the difficult market environment.

Standard Chartered (other-otc: SCBEF.PK - news - people ) added 4.4 percent and

Commerzbank rose 9.3 percent after saying it will take

an 8.2 billion euro ($10.5 billion) capital injection from the

German state and a further 15 billion in guaranteed funding to

secure refinancing.

Germany's second-biggest bank also said it swung to a net

loss of 285 million euros in the third quarter after a profit of

339 million in same period last year.

But Barclays (nyse: BCS - news - people ) sagged 6.4 percent on concern that

raising capital privately is too expensive and dilutive.

Barclays is raising 7 billion pounds, mostly from investors

in Abu Dhabi and Qatar. Analysts at Merrill Lynch (nyse: MER - news - people ) estimated the

fundraising may cost investors 3.2 billion pounds.

Deutsche Bank (nyse: DB - news - people ) rose 7.2 percent. Germany's largest

bank will not tap into a rescue fund launched by the German

government to help banks hit by the global financial crisis, its

chief executive said on Sunday.

PHARMAS GAIN

Shares in UCB gained 12.6 percent after U.S.

regulators approved the Belgian drugmaker's over-active bladder

drug Toviaz, which is being distributed by Pfizer (nyse: PFE - news - people ).

Other pharmaceuticals forged higher, with Novartis (nyse: NVS - news - people )

up 0.8 percent, GlaxoSmithKline (nyse: GSK - news - people ) rising 1 percent and

Merck (nyse: MRK - news - people ) up 1.6 percent.

Defensive utilities shares also rose, with E.ON (nyse: EON - news - people )

gaining 4.8 percent, RWE up 2.6 percent and Veolia adding 0.8 percent.

Volkswagen (other-otc: VLKAF.PK - news - people ) (VW) shed about 13 percent and was the

biggest percentage faller in Europe. Ordinary shares in VW could

be expelled from the DAX index as early next Thursday,

the Frankfurt stock exchange operator said on Friday.

Separately, VW plans to produce virtually all the components

for motors used in hybrid and electric vehicles on its own,

unlike competitors who rely on suppliers, German magazine auto

motor und sport reported. The magazine said, citing company

sources, VW wants to invest 3.2 billion euros in the coming five

years into new component production sites.

Meanwhile, Equinet cut its price target on the stock to 82

euros from 88 euros.

Renault (other-otc: RNSDY.PK - news - people ) added 1.5 percent. The group said it

expected Nissan (nasdaq: NSANY - news - people )'s fiscal second-quarter earnings to

lead to a contribution of 189 million euros to Renault's

second-half net profit.

(Editing by Victoria Bryan)

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(rebekah.curtis@reuters.com; +44 20 7542 4365; Reuters Messaging: rebekah.curtis.reuters.com@reuters.net)

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